NEW YORK (6/24/15)--Some small financial institutions have turned to peer-to-peer lending programs in order to expand credit opportunities.
A community bank in Rhode Island has partnered with online peer-to-peer Lending Club to re-establish itself in the consumer loan market, The Wall Street Journal reported Monday.
The agreement--part of larger group of more than 200 community banks--allows Lending Club to market directly to bank customers and share revenue from non-mortgage loans with the participating financial institutions.
In collaborations such as this, consumer information is shared with a likely competitor.
“Cooperation is good but it depends on who you cooperate with,” Mike Schenk, CUNA vice president of economics and statistics, told The Journal. A partnership with a company like Lending Club isn’t necessarily “a magic bullet” to solve smaller financial institutions’ challenges.
“I would say tread lightly,” he advised.
Among the risks financial institutions take with an online alliance is customers may decide to do all transactions online and remove the original bank from their relationship.